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The Myths and Facts About International Tax Outsourcing: Part 1

1/4/21 3:45 PM

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Xpitax® has been handling international tax outsourcing for accounting firms for over 18 years. We've heard almost every question, myth, and outrageous rumor you can think of when it comes to international tax outsourcing. After answering thousands of questions throughout the years, we thought it was time to set the record straight and separate the myths and facts of international tax outsourcing.

Read on to learn the truth behind the top myths of international tax outsourcing, myths, and don't forget about the 7216!

Myth: If I outsource tax returns offshore, my client's data won't be secure.

Fact: A top-tier tax outsourcing provider will have robust client data protections and protocols in place to prevent data breaches.

In the past, client data protection was the first question for firms when discussing tax outsourcing services. However, as firms and staff become more comfortable with cloud accounting and security, and clients trust the firm to protect their data, these concerns have decreased. Clients expect that the firm has done its due diligence during the vetting process and choose a tax outsourcing provider who will protect their information against external and internal risks.

As part of this due diligence, make sure to vet potential outsourcing providers properly. Make sure they have a plan in place to protect information, whether in office or remote. Ask what security protocols they have in place to protect confidential and sensitive information. Are they SOC2 compliant? Do their employees sign a non-disclosure agreement? What about sign-in authentication? How secure is their remote and in-office environment?

Xpitax® has maintained SOC2 certifications with significant investments in building state of the art secure infrastructure for our outsourcing operations. This investment has ensured that our clients have the highest level of reliability, performance, and security available. Our facilities were designed expressly for outsourcing tax and accounting compliance work, with stringent physical and network security measures to safeguard sensitive client data, with a fully redundant network infrastructure at a secure US datacenter.

Myth: Outsourced returns are of inferior quality; my staff will waste time fixing the returns.

Fact: Returns prepared by an experienced tax outsourcing provider will be of the same or higher quality than returns prepared by the firm's existing staff.

In a recent Xpitax survey, 24% of respondents named quality of work as the most significant deterrent to utilizing tax outsourcing services. It's a valid concern – what's the point of outsourcing work if in-house staff will spend significant amounts of time reviewing and correcting outsourced returns?

Xpitax clients have no such issues. In post-tax-season surveys, we hear from existing clients that the work done by our outsourcing staff is the same (or better) quality as their in-house staff. However, not every outsourcing provider has the same stringent education, experience, and training requirements.

To avoid receiving low quality or error-filled returns, work with an experienced outsourcing provider who hires qualified and skilled professionals who are highly trained to meet or exceed the quality of preparation done in the "back office" of most CPA firms. Ask about staff experience and continuing education, including how often the staff receives training on U.S. tax laws and regulations.

Keep in mind that tax knowledge isn't the only factor in return quality. Many firms prefer to have returns and workpapers completed and compiled in a specific manner. Look for a tax outsourcing provider that offers initial and / or yearly training for firms to discuss firm-specific requirements, as well as how to send returns, what information is required, and what the final output will look like.

Don't forget to ask about the review process. Does your tax outsourcing partner have an experienced tax manager performing a first-level review of the return before it is sent to the firm? They should be.

Learn how Xpitax Tax Outsourcing can make your firm, staff, and clients successful.

Myth: I won't know the status of my client or their return.

Fact: Control and visibility into the return's status and expected delivery dates can be accessed on-demand when firms and vendors utilize a workflow solution.

Loss of control and visibility into the status of a return is almost always part of the discussion for accounting firms when deciding whether or not to utilize tax outsourcing as part of their overall tax strategy. When a tax outsourcing provider partners with the firm's workflow platform, the firm has consistent visibility into the return's status and expected delivery dates, which means they know exactly where the return is in the process.

Xpitax recognized the need for clear visibility into the work being done and where it was in the process in 2003. This need was the impetus that launched XCMWorkflow® for CPA firms. With a workflow solution, every return can be tracked and managed. Both the firm and the outsource provider know the status of that return and the expected delivery date.


Read the second myths and facts installment here, and don't forget to register for the January 1th webinar to learn how to prepare for tax season with Xpitax!

Ray Barlow

Written by Ray Barlow

Ray is XCM’s Senior Vice President of Xpitax Tax Outsourcing and CAS Remote Staffing Services, helping public accounting firms optimize client service, balance workload compression, and maximize profitability His 30+ years in the tax, accounting, and finance industry include years spent with Wolters Kluwer, Thomson Reuters, and Sage.